Two Lawyers Strike Gold
In U.S. Disability System

By

Damian Paletta And

Dionne Searcey

December 22, 2011

Lawyers Harry and Charles Binder began representing applicants for Social Security disability benefits in the 1970s, when the field was a professional backwater. Last year, their firm collected $88 million in fees for guiding clients through the system, government data indicate, making it the nation's largest Social Security disability advocate by far.

"We'll deal with the government," a cowboy-hatted Charles Binder proclaims in his firm's ubiquitous television ads. "You have enough to worry about."

ENLARGE

Binder & Binder co-founder Charles Binder in one of his firm's TV ads.
Binder and Binder

Having firms like Binder & Binder deal with the government was supposed to be part of the solution for a federal disability-insurance system staggering under a growing backlog of cases. The Social Security Administration figured cases would move through the pipeline faster if more claimants were guided by experts. So in 2004 the agency and Congress relaxed rules governing representation, making it easier for nonlawyer advocates to get paid. Binder swiftly hired lower-paid nonlawyers to handle cases, ramped up advertising and began processing far greater numbers of clients.

The rise of such specialty firms now is testing the system in new ways.

Kenneth Nibali, a top agency disability official before his retirement in 2002, says the way firms are paid could encourage them to push boundaries in how they craft appeals. The firms collect fees only if they win, and at the hearings where decisions are made, there are no government lawyers pushing back against applicant claims, leaving it solely up to an administrative law judge to sniff out misleading applications. "Does it raise questions about whether we are getting the most objective information? I think that's a legitimate issue," says Mr. Nibali.

ENLARGE

Binder & Binder has been reprimanded by the Social Security Administration for backdating documents, and the agency is investigating whether it forged signatures of ex-employees. Five former Binder employees said in interviews that staffers routinely withheld from government submissions medical records that they believed to be potentially damaging to client claims. The firm had a system, they said, that used red stickers to highlight unfavorable information in client files, and that material often would be left out of court submissions.

In a May 4, 2005, memo sent to "lawyers, writers, and folks who review meds," or medical records, Charles Binder wrote that a general principle was, "if it is not harmful to the client, it should be submitted." The words "not harmful" appear in bold letters.

The 2004 federal law that opened the door for greater participation by nonlawyers also stipulated that applicants or their advocates must not omit from government submissions "a fact which the person knows or should know is material to the determination of any initial or continuing right to or the amount of monthly insurance benefits."

The Binder brothers declined to comment for this article. A person close to management acknowledged that the firm labels its records with colored stickers, but said that it doesn't withhold "material facts" from court submissions.

Long Road

Judges long have complained that the Social Security Administration should have another official at the hearings to serve as a counterweight to the people seeking benefits for claimants, which they say would make the process more fair. Judges are obligated both to defend the government's pool of disability money and to make sure deserving applicants receive benefits, noted Randall Frye, head of the Association of Administrative Law Judges, in a letter to Congress in July. He said the "SSA uses a model unheard of throughout our land to find facts in a judicial-type setting."

The Social Security Disability Insurance system is intended to provide a safety net for people who no longer can work due to a physical or mental condition. Those who qualify receive a monthly stipend and access to federal health-care programs, often until they turn 66 and Social Security retirement benefits fully kick in.

High unemployment and an aging population have left the system under severe financial pressure. The number of people collecting benefits rose to 10.6 million in November, from 6.9 million at the end of 2001. Budget experts say the program could exhaust its reserves within six years, making it the first major entitlement program to do so.

The greater involvement of claimant advocates like Binder, along with pressure on judges to move cases faster, has helped reduce the average time to clear a case to 360 days, from 514 in 2008. But the number of pending appeals continues to mount. At the end of September, 771,318 people were waiting to have cases heard, compared with 705,367 one year earlier, and 463,052 in 2002.

Many cases are handled by small law firms or legal advocates for the poor, which generally have modest client rosters and offer more personalized service than bigger firms, according to judges, lawyers and claimants. Other firms have built large national practices similar to Binder's, including Disability Group Inc. of Santa Monica, Calif.

Hauppauge, N.Y.-based Binder, which has offices in a dozen states, advertises heavily to attract clients, spending more than $20 million on TV ads in the past year, according to Nielsen. Between 2001 and 2010, it represented about 200,000 clients, according to records from a recent lawsuit stemming from a dispute with a competitor.

Initial applications for disability benefits usually are decided in state agencies that work with the Social Security Administration. Applicants are required to provide medical records establishing that they are unlikely to be able to work for at least a year, or that their health problems are terminal.

ENLARGE

If denied at the state level, applicants can request a hearing before an administrative law judge. Often, that is the point at which lawyers get involved. If the appeal is successful, the applicant is entitled to "back pay"—disability payments dating to the time of the injury or disability. Lawyers can collect 25% of that award, up to $6,000. Further appeals can eventually land the case in U.S. district court.

Theodore Lawler, 61 years old, of Staten Island, N.Y., was turned down for disability benefits in 2007 after claiming he suffered from post-traumatic stress disorder, depression and hearing loss from serving in the infantry in the Vietnam War.

In a January 2009 appeal, he told an administrative law judge he stopped working as a union carpenter because "I wasn't getting along with a lot of people and I was getting a bad reputation, like I was losing control of, I guess, my nerves," according to records from a later federal-court hearing. The administrative judge, citing one doctor's 2007 conclusion that he was "in remission," turned him down. Mr. Lawler hired Binder to appeal.

Last month, a federal district judge in Brooklyn vacated the decision, saying earlier rulings relied too heavily on the 2007 doctor's report, over other doctors who offered contrary evidence.

"It was all taken care of by them," says Mr. Lawler about Binder. "I just stayed home and they called me up and told me they won the case."

The cap on legal fees has made such work financially unattractive for many lawyers. But specialty firms like Binder have figured out a way to make it lucrative.

In 2010, a $1.4 billion slice of the disability awards paid by the Social Security Administration under its primary disability program went to disability advocates as fees, up from $425 million in 2001. The $88 million the Binder firm collected last year was more than triple the $26 million it got in 2006, according to data obtained under a Freedom of Information Act request. Direct payments to Charles Binder, who is 61, totaled $22.8 million last year.

In 2010, the brothers sold a large stake in their company to a division of H.I.G. Capital, a Miami-based private-equity firm, for an undisclosed sum. H.I.G. declined to comment.

Several administrative law judges say Binder's business model is based on volume. Anthony Washington, a former Binder case manager in New York, describes the operation as "like a warehouse" with the goal of seeing "how much money they can make."

Some judges said in interviews that the firm has the practice down to a science, creating a model that many competitors are working to mirror. Other judges said they have chastised the firm's employees for submitting incomplete files or for introducing themselves to their clients only five minutes before a hearing.

To prepare for appellate hearings, lawyers frequently seek to bolster the cases by supplementing the case record with additional medical reports. Although the 2004 law obligates claimant advocates not to omit material information, the Social Security Administration doesn't have a definitive policy about what should be submitted. Agency spokesman Mark Hinkle says firms have to be "forthright" with the agency.

Robert E. Rains, a law professor at Pennsylvania State University and director of the school's Disability Law Clinic, says his view on the 2004 law is that medical records that directly pertain to disability claims must be turned over, although he adds that "Social Security has been admittedly less than clear on this point."

The five former Binder employees said that once Binder collects the additional medical records, employees affix colored stickers to the documents. According to the former employees, green ones go on documents that either don't need further review or will help clients win benefits, such as a report on a scan showing an injury; yellow ones on material that might give pause to judges, such as doctor references to jail time; and red on material such as references to current substance abuse or a doctor's opinion that a person can still work, walk long distances or lift heavy things.

The five former employees said records with red stickers often were not handed over to the Social Security Administration. Shawn Beckett, a lawyer at Binder from April 2008 through February 2009, said he was instructed by a superior "that anything that was not favorable should be 'red' and not turned into the record." He said he felt uncomfortable withholding records and didn't do so, but said that many colleagues did.

Mr. Beckett and one other former employee said they reviewed applications they believe would have been denied had all of the information been presented. Mr. Beckett said he recalled cases in which doctors said the person applying for benefits was capable of returning to work, but that information was withheld from the application.

Mr. Beckett said he was fired by Binder in 2009 for taking on clients outside the firm's auspices.

Two other former Binder lawyers who said they were not fired and did not work with Mr. Beckett also said that medical information was withheld that would have undermined clients' cases, as did two other former employees who weren't lawyers. Three of those former employees said supervisors often made the decision about which medical information was withheld. It isn't clear whether any Binder clients were aware of the practice.

According to the person close to Binder management, those who received the 2005 memo from Charles Binder—the one suggesting that a medical record generally should be submitted "if it is not harmful to the client"—"understood that 'harmful' referred to incomplete, incoherent, illegible, misappropriated or potentially immaterial medical evidence in need of further review, clarification or completion before being submitted."

The Social Security Administration says its job isn't to police firms that represent disability applicants. "We are not so much in the business of, quote unquote, monitoring law firms," says the agency's commissioner, Michael Astrue. "We are in the business of monitoring the quality of the legal services provided to our claimants in our courtrooms."

Mr. Hinkle, the Social Security spokesman, says the agency's inspector general, not the agency itself, is responsible for enforcing the 2004 law. A spokesman for the inspector general says investigators had "not received allegations of law firms withholding material information from SSA, but were we to receive such allegations, we would review them as we would any allegation."

The agency has complained to Binder about some of its practices. On April 11, it instructed Charles Binder to stop attaching "privacy statements" to disability appeals—which could have denied the agency the right to speak to various third parties, such as an applicant's friends and neighbors. Several administrative law judges said the firm has since stopped the practice.

Mr. Astrue, the agency's commissioner, said in an interview that the agency had reprimanded Binder for backdating documents, although he declined to elaborate. Dates on disability applications can be crucial to meeting deadlines and determining fees.

In addition, the agency is investigating whether Binder forged the signatures of some employees who had left the firm, said one person with knowledge of the probe. The alleged practice might have been used by Binder to petition the government for fees after it wins an appeal, even if the employee who represented the client no longer works at the firm, that person said.

Binder has told officials that employees signed "power of attorney" forms that gave Binder the ability to sign their names, people familiar with the matter said. The agency spokesman said he couldn't "confirm or deny" the existence of an investigation.

Many Binder clients say they appreciate the firm's ability to get results. Michael Plouffe, 31, of Old Lyme, Conn., had been trying for four years to get a claim approved based on sclerosing mesenteritis, a disease that causes inflammation of the small intestine. His pain was so bad, he says, that he quit his job as an emergency medical technician in April 2007. His application for disability benefits also noted he suffered from depression.

He says his case was a tricky one because he had a history of substance abuse, mostly painkillers. He contended it was tied to his pain, rather than an addiction, a position past judges deemed subjective and cited in denying him benefits.

Binder represented him in a series of appeals that eventually landed the case in federal district court in Connecticut.

Binder provided medical records that contended the substance abuse was caused by Mr. Plouffe being "wracked with intense physical pain, obsessed with trying to numb it," according to the federal court records. On Dec. 1, the federal court awarded him benefits.

"It was a long tough battle, and they stuck with it for nearly five years for me," says Mr. Plouffe, who says he's been drug-free in recent years. "They were very persistent."

Top Reps

The Social Security Administration pays legal firms directly for successfully winning disability benefits for their clients. Here are the top 10 individuals collecting fees from 2010.

Name

2010 payments

Based

Comment?

Charles Binder

$22,817,430.62

Hauppauge, N.Y.

Declined to comment

Thomas Nash

$6,292,296.41

Chicago

Didn't respond to request for comment

Eric Conn

$3,815,512.96

Stanville, Ky.

Didn't respond to request for comment

Michael Sullivan

$3,614,429.13

Lousiville, Ky.

Didn't respond to request for comment

Frank Latour

$3,464,262.24

Colton, Calif.

Didn't respond to request for comment

Ronald Miller

$3,241,150.42

Santa Monica, Calif.

A spokesman for Disability Group, the firm run by Mr. Miller, said, 'Statistically, claimants who employ an attorney to represent them are much more likely to win than those who go unrepresented. We are proud of the results we have achieved for our clients, helping them obtain justly deserved benefits. The $3.2 million is for the work performed by our national firm to help clients achieve their deserved benefits.'

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